VIOLENT CRIME SURGES HURT BUSINESSES
MOST IN LOW-CRIME AREAS

COLUMBUS, Ohio -- When violent crime surges in low-crime areas, retail
businesses there seem to suffer more than do their counterparts in areas
with normally high crime rates, new research has found.

Robert Greenbaum

A study of business activity and crime in five cities found that when
the number of homicides increased dramatically in low-crime rate zip codes,
there were significant reductions in the growth rate of new retail and
service businesses, and employment in existing businesses.

Surges in homicides in high-crime areas had no significant effect on
local business growth.

“It is not just the levels of crime, but the fear of crime that
affects the decisions people make,” he said.

“The fact that violent crime is rare in low-crime areas makes
any increase all the more shocking and frightening. Customers are less
likely to visit businesses in the neighborhood, and entrepreneurs are
less likely to open a new business.”

The findings showed that
homicide surges in low-crime areas hurt business growth and employment
in service and retail businesses, such as grocery stores, barber
shops and doctors’ offices. There was less of an effect on
other types of businesses, such as manufacturing plants.

Greenbaum conducted the study with George Tita, assistant professor of
criminology, law and society at the University of California – Irvine.
Their results were published in a recent issue of the journal Urban Studies.

Tita said the results show how violent crime is an issue outside the
high-crime areas of cities and affects more than just victims.

“It has a far-reaching economic impact beyond loss of life to
homicide.”

The researchers used data on homicide rates between 1987 and 1994 in
individual zip codes within Chicago, Houston, Miami, Pittsburgh and St.
Louis. The data came from the National Consortium of Violence Research.
They focused on homicide because homicide rates are related to levels
of other violent crimes, homicide is better reported than other crimes,
and it is normally very visible to the community.

They examined changes in the homicide rates from year-to-year to identify
zip codes within the five cities that underwent a surge in homicides.
They considered a zip code to have surged in any year that it had one
of the highest (top 10 percent) increases in the number of homicides above
its own baseline average for murders.

The researchers also looked at businesses opening and closing in each
of the same zip codes, as well as employment trends for each business
operating in the neighborhood. This data came from the Longitudinal Business
Database from the U.S. Census Bureau.

The goal was to compare business growth rates before and after homicide
surges. These growth rates were compared to rates in similar matched zip
codes that did not undergo surges in crime.

Of the 260 zip codes the researchers studied, 105 experienced a homicide
surge during at least one year between 1987 and 1994. Of course, for some
low-crime areas, a relatively small number of homicides during a particular
year may qualify as a surge, Greenbaum said.

The findings showed that homicide surges in low-crime areas hurt business
growth and employment in service and retail businesses, such as grocery
stores, barber shops and doctors’ offices. There was less of an
effect on other types of businesses, such as manufacturing plants.

“Businesses who have to attract customers will find it more difficult
if people are afraid to go into the neighborhood where they are located,”
Greenbaum said. “It may also make it more difficult to find employees
who are willing to work there.”

In medium-crime areas, homicide surges had some negative effects on
business, but not as much as in the low-crime areas. The study found no
effects on businesses when surges occurred in high-crime neighborhoods.

“In high-crime areas, a surge may not even be perceptible to many
people,” he said. “Businesses and customers are already aware
of the high crime rate and have adjusted their expectations.”

That doesn’t mean violence doesn’t hurt businesses in high-crime
areas, Greenbaum said. These areas have fewer new businesses and lower
employment rates than other areas of the city. However, because businesses
and customers have already done what they can to deal with the crime,
surges in the crime rate don’t have as strong an impact.

“The results show how the fear of crime can directly impact the
activities of customers and potential employees, and how this impact can
be greatest in areas with the least crime,” he said.

The researchers are continuing their work now by studying how crime
affects housing markets in Los Angeles and Columbus.